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TMI Blog2022 (9) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner-Revenue as the same will be under their domain. In the case in hand, the respondents are running health care services wherein the patients are categorized primarily in two categories; out patients and in-patients for administrative convenience. The out patients are those who visit a hospital for routine check ups or clinical visits. In-patients are those who are admitted in the hospital for the required treatment. Normally, there is a central pharmacy from where the procured stock of medicines, implants, consumables etc. are supplied to its outlets such as; in-patient pharmacy, operation theater pharmacy and out-patient pharmacy. The in-patient pharmacy and operation theaters pharmacy supplies medicines and consumables only to in-patients - the medicines, implants, room provided on rent used in the course of providing health care services/medical treatment to the patients admitted for diagnosis for treatment in the hospital or clinical establishment are undoubtedly naturally bundled in the main services of medical treatment and it is a composite supply to facilitate health care services. The case in hand pertains to rendering of health care/medical services and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner(s) : Mr. Punit Singhvi, Adv. With Mr. Ayush Singh, Adv., Mr. Akshat Dewan, Adv., Mr. Swapnil S. Sharma, Adv. Mr. Sheetanshu Sharma, Adv. With Mr. Parnav Bhansali, Adv. For Respondent(s): Mr. Alkesh Sharma, Adv. Mr. Amit Jindal, Adv. Mr. Dinesh Kumar, Adv. Judgment / Order Per: Hon'ble Sameer Jain, J. 1. Instant Sales Tax Revision Petitions under Section 84 of the Rajasthan Value Added Tax Act, 2003 (for short, 'RVAT Act, 2003') read with Section 86 of the Rajasthan Sales Tax Act, 1994 have been filed by the petitioner-Revenue assailing the order impugned passed by the learned Tax Board, Ajmer. 2. All Revision Petitions in the bunch of cases are involving identical questions of law and based on the same set of facts. Therefore, with the consent of learned counsels, the matter is taken up for final disposal. SB Sales Tax Revision Petition No.139/2019 is taken up as a lead case for deciding the questions of law which will apply mutatis-mutandis to all the connected Revisions. 3. The matter was heard on the following questions of law:- Whether in the facts and circumstances of the case, the learned Tax Board was right in law in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusive definition of 'sale', which was broadened by Article 366(29A) of the Constitution of India, it was obligatory on the part of the respondents to discharge VAT and therefore, they were liable as per Entry 86 under Schedule-IV at the rate of 5.5% or as per applicable rate. 7. Learned counsel for the petitioner-Revenue drew attention of this Court towards the findings arrived at by the learned Appellate Authority which provide as under:- 8. While replying upon the said findings of the Appellate Authority, learned counsel for the petitioner-Revenue submitted that in the invoices, there is a separate charge reflected towards the sale of eye lenses, consumables and other pharmaceutical items. He further submitted that the eye lenses sold to the patients are at value added price and therefore, by fiction of law and extended definition of sale in the light of Article 366(29A) of the Constitution of India and in terms of Section 2(35) of the RVAT Act, 2003, the sale of medicine/pharmaceutical items, installation of implants will qualify to be sale and therefore, liable for payment of tax and the hospitals in question will constitute as dealer and the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the transaction of sale and transaction of service. If a Doctor or a nursing hospital, through its pharmacy or drug store, sell prescription drugs/medicines to outdoor patients or outsiders, same will be pure transaction of sale and VAT will be attracted. Whereas, when the indoor patient comes for treatment or for diagnosis, health care services are provided by the hospital which are bundled services and the predominancy is qua the treatment only. Other services including, but not limited to, room facility, installation of implants, consumption of drugs/medicine by the patient supplied via pharmacy are merely incidental and they will not pass litmus test to qualify for definition of sale u/s 2(35) of the Act, nor the clinical establishment/hospital will qualifies to fall under definition of dealer. 12. In support of their contentions, learned counsels for the respondents has laid emphasis upon the Apex Court judgment rendered in the case of Bharat Sanchar Nigam Limited and another (supra). He has further placed reliance upon judgments rendered in Tata Main Hospital Vs. State of Jharkhand Ors.: (2008) 10 VAT Reporter 1 (Jharkhand); State of Jharkhand Ors. Vs. Tata Mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med therein. 16. As per Article 246 of the Constitution of India, which is enshrined in Part XI, power of making laws is conferred upon the Parliament and Legislatures of the States. The respective subject matter on which law can be made by Union and State are enumerated in Schedule VII wherein List I pertains to subject matters on which Parliament can legislate i.e. Union List. List II pertains to State List, as to matters on which State Legislature has power to legislate. Lastly, List III is Concurrent List which deals with those subject matters that can be legislated by both Parliament and State Legislatures. As per List I i.e. Union List of Schedule VII, Entry 92-C prescribes tax on service and Entry 97 prescribes residuary entry i.e. levy of tax on residuary matters not prescribed in any of the Lists. 17. Similarly, List II pertains to State list and Entry 54 specifies taxes on the sale or purchase of goods. The respective Entries namely; 92-C, 97 of List I and Entry 54 of List II are reproduced as under:- List I 92-C Taxes on services. 97. Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplying or distributing any goods belonging to any principal whether disclosed or not; (ii) an auctioneer, who sells or auctions goods belonging to any principal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal; (iii) a manager or an agent, of a non resident dealer who buys, sells, supplies or distributes goods in the State belonging to such dealer; (iv) any society, club, trust or other association, whether incorporated or not, which buys goods from or sells goods to its members; (v) a casual trader; (vi) the Central or any State Government or any of their Departments or offices which, whether or not in the course of business, buy, sell, supply or distribute goods directly or otherwise, whether for cash or deferred payment or for commission, remuneration or other valuable consideration; and (vii) any trading, commercial or financial establishment including a bank, an insurance company, a transport company and the like which, whether or not in the course of its business, buys, sells, supplies or distributes goods, directly or otherwise, whether for cash or d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er as consideration for the sale of any goods less any sum allowed by way of any kind of discount or rebate according to the practice normally prevailing in the trade, but inclusive of any statutory levy or any sum charged for anything done by the dealer in respect of the goods or services rendered at the time of or before the delivery thereof, except the tax imposed under this Act; Explanation I. In the case of a sale by hire purchase agreement, the prevailing market price of the goods on the date on which such goods are delivered to the buyer under such agreement, shall be deemed to be the sale price of such goods; Explanation II. Cash or trade discount at the time of sale as evident from the invoice shall be excluded from the sale price but any ex post facto grant of discounts or incentives or rebates or rewards and the like shall not be excluded; Explanation III. Where according to the terms of a contract, the cost of freight and other expenses in respect of the transportation of goods are incurred by the dealer for or on behalf of the buyer, such cost of freight and other expenses shall not be included in the sale price, if charged separately i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes and consumables only to in-patients. The hospital is expected to provide not only primary services of medical treatment but also to provide lodging, nursing care, supply of medicines, food and operational/ procedural treatment under the supervision of Doctor until discharge. There are bundle of services embodied to the primary services of medical treatment. The primary service without any doubt is of medical treatment but there are ancillary and incidental services of lodging, care, medicine, supply of food, implant of surgical items, installation of lenses, stents etc. Hence, the medicines, implants, room provided on rent used in the course of providing health care services/medical treatment to the patients admitted for diagnosis for treatment in the hospital or clinical establishment are undoubtedly naturally bundled in the main services of medical treatment and it is a composite supply to facilitate health care services. 24. Whereas the out-patient pharmacy attached to the hospital provided drugs/medicines etc., upon valid prescription to outpatients and outside customers and receives consideration. No service of medical treatment is rendered and the dominant nature of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder service, and impose tax on the sale. The test therefore for composite contracts other than those mentioned in Article 366 (29A) continues to be - did the parties have in mind or intend separate rights arising out of the sale of goods. If there was no such intention there is no sale even if the contract could be disintegrated. The test for deciding whether a contract falls into one category or the other is to as what is 'the substance of the contract . We will, for the want of a better phrase, call this the dominant nature test. 51. What are the goods in a sales transaction, therefore, remains primarily a matter of contract and intention. The seller and such purchaser would have to be ad idem as to the subject matter of sale or purchase. The Court would have to arrive at the conclusion as to what the parties had intended when they entered into a particular transaction of sale, as being the subject matter of sale or purchase. In arriving at a conclusion the Court would have to approach the matter from the point of view of a reasonable person of average intelligence. 87. It is not possible for this Court to opine finally on the issue. What a SIM card represents is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of establishment of the contractor which is relatable to supply of labour and services cannot be included in the value of the goods involved in the execution of a contract and the cost of establishment which is relatable to supply of materials involved in the execution of the works contract only can be included in the value of the goods . 26. Applying the ratio of the judgment of Bharat Sanchar Nigam Limited and another (supra), this Court has to analyze and apply the Aspect Doctrine or Predominant Criteria Test in order to determine whether the transaction in question constitutes supply of goods i.e. sale or rendering of medical treatment/health care services constituting service . 27. Analyzing the case in hand and considering that lenses, stents, implants and sale of medicines are made to the indoor patients while carrying out medical treatment services, it is beyond doubt that predominantly, the same constitutes medical treatment/ health service and it is a case of composite supply whereas the predominancy is of a service and other incidental sales/services are bundled into it. Therefore, the classification and categorization of the said transaction will be of ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of the medical services rendered by the TMH to the patients and for that the TMH is realizing charges against the head Pharmacy without giving particulars and break-up as to what is the charge being realized for medicines, what is the charge being realized for surgical items and for x-ray films and plates etc. used in course of treatment to those indoor patients and, therefore, it cannot be said that the medicines, surgical items, x-ray films and plates etc, were sold by the TMH to the indoor patients. In fact the supply of those articles were made by the TMH as a part of service rendered by the TMH during the treatment of the indoor patients and, therefore the transaction cannot be said to be 'sale' within the meaning of Section 2 (t) of the Bihar Finance Act. 26. The transaction of supply of medicines, vaccines, surgical items, x-ray films and plates etc. to the indoor patients in course of treatment in TMH does not come within the purview of the definition of 'sale' as envisaged under Section 2 (t) of the Bihar Finance Act for the following reasons: (i) Supply of those articles are part and parcel of the treatment and they are essentially requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a the goods under the same set of legislation. In a case of Advanced Ruling under GST Act, 2017, it was held in KIMS Health Care Management Ltd. Kerala: [2018] 99 taxmann.com 37 (AAR-Kerala) that supply of medicines, consumables and implants used in the course of providing medical health care services to the in-house patients for diagnosis or treatment by the hospital are naturally bundled services and are provided in conjunction with each other as a composite supply and will fall under exemption under the category of health care services and not individually as a goods and will not qualify as supply. 35. It is also noteworthy to mention that the transaction in question was clarified to be a service and exempted under the erstwhile law of service tax wherein vide notification No.25/2012, the health and care services rendered by clinical establishments were exempted and were declared as service and not sale/supply. 36. Learned counsel for the petitioner-Revenue has relied upon judgment in MIOT Hospitals Ltd. (supra) wherein while relying upon Tamil-Nadu VAT Act, 2006, the learned Single Bench of Madras High Court has finally held that the respondents shall exclude the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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